The week in investor relations: BlackRock pulls back on E and S support, reporting losses from Russia’s war in Ukraine and Tesla volatility spurs creation of first hedged single-stock ETF
– According to Reuters (paywall), BlackRock reported a sharp drop in its support for environmental and social-related shareholder proposals, saying many were too prescriptive, while its backing for directors and executive pay held steady. BlackRock had warned in May it would back fewer shareholder proposals because many were too constraining – for example, urging banks to stop funding energy companies.
The firm also cited SEC guidance that resulted in fewer shareholder resolutions being blocked by the agency and 245 being put before investors, up 133 percent on the year. In the 12 months to the end of June, BlackRock said in a report it had supported 71 of the 321 environmental or social shareholder resolutions filed globally, excluding Japan, or 22 percent of the total. In the previous year, BlackRock had supported 81 of the 172 environmental or social shareholder resolutions filed, or 47 percent.
– The SEC continues to ask companies about how they disclose the financial impact of Russia’s war on Ukraine and has asked many of them to make changes for future filings, The Wall Street Journal (paywall) reported. The SEC in May published a list detailing the information it seeks from companies to ensure investors can adequately assess risks. In recent weeks, it has sent out additional queries and, in some cases, follow-ups. Companies will likely make additional disclosures as they wind down their operations in Russia, potentially taking significant impairment charges as a result. The SEC, between March 9 and July 22, sent at least 39 letters to 16 companies asking about the war’s impact, according to research firm Audit Analytics. It also questioned nine funds, including ETFs and mutual funds.
– Just weeks after the first leveraged single-stock ETFs listed in the US, investors are being offered the polar opposite in a Tesla-based product that hedges for steep declines in its price, reported the Financial Times (paywall). The world’s first ‘risk managed’ single-stock ETF, from Illinois-based Innovator Capital Management, is designed to protect investors from large losses in return for capping the potential upside. The Innovator Hedged TSLA Strategy ETF will limit potential losses to 10 percent a quarter, with the cap for the initial contract (running to the end of September) set at 9.29 percent.
‘While there is little doubt Teslas are amazingly sleek, smooth-driving vehicles, the very volatile ride in the shares leaves a lot to be desired,’ said Bruce Bond, co-founder and chief executive of Innovator. ‘Yet the innovation potential that Elon Musk’s company represents is hard to ignore. For investors with a lower risk tolerance that still desire exposure, we’re excited to bring this investment strategy to market.’
– In other Musk and Tesla-related news, CNBC reported that Tesla disclosed it had received a second subpoena from the SEC regarding CEO Elon Musk’s tweets in 2018 about taking the company private. Tesla said in a filing that it received the subpoena on June 13. The agency had initially subpoenaed the company in November related to a settlement that required Musk’s tweets on material information to be vetted. The company said on Monday it will co-operate with the government authorities. The SEC declined to comment.
CNBC also reported that Twitter will hold a shareholder meeting to vote on the company’s $44 bn acquisition by Musk on September 13. Twitter’s board has previously urged its shareholders to approve the company’s sale to Musk.
– CEO succession events are pushing up independent board member numbers, said Cooley PubCo. Independent board chairs may no longer be absolutely de rigueur from a corporate governance perspective, reported the blog, adding that ‘even ISS has a somewhat nuanced view on the subject, but the percentage of independent board chairs has been increasing. So why is that? According to a recent report from The Conference Board, it’s not, as might be expected, because of shareholder proposals requesting a separation of these roles to shore up board independence. Rather, ‘it’s likely driven by CEO succession events, as well as the growing workloads of boards and management’.
– Reuters said that, according to a new report, a quarter of firms operating at Lloyd’s of London have reached the commercial insurance market’s target for 35 percent of leaders to be women, though progress on diversity was ‘incremental’. Lloyd’s has been trying to improve diversity in the market, which employs around 45,000 people in insurance and broking firms based in the City of London financial district.
Lloyd’s published its first culture report in 2020 and has set targets for improvement. Eighteen firms, or 26 percent of those surveyed, met or exceeded the target for 35 percent of boards, executive committees and those committees’ direct reports to be women, Lloyd’s said. It added that women fill 30 percent of leadership positions. The 35 percent target is supposed to be met by the end of 2023.
– Singapore Exchange (SGX) announced a collaboration with the NYSE that will include efforts to develop new ETFs, as well as ESG products, said the FT. The two bourses signed a memorandum of understanding last week that outlines the focus areas of the partnership, which will include dual listings of companies on both exchanges and supporting index product development at SGX and NYSE affiliate company ICE Data Indices. The agreement aims to ‘address the growing complex needs’ of market participants and investors, according to Loh Boon Chye, chief executive of SGX Group.
– Bloomberg (paywall) reported that Credit Suisse has replaced its ‘embattled’ CEO, saying it will embark on a new turnaround plan – just nine months after the last one, as the Swiss bank indicated it aims to ‘slash the size of its investment bank in the face of mounting losses’. The firm tapped asset-management head Ulrich Körner to be CEO starting next week, replacing Thomas Gottstein, who is resigning after a two-year tenure ‘marked by scandal and huge losses’. The firm, which posted a larger-than-expected CHF1.59 ($1.65 bn) second-quarter loss, said the review will include cutting at least another CHF1 bn of costs and evaluating its securitized products trading unit.
– Europe’s biggest oil companies Shell and TotalEnergies extended share buybacks this week, reported Reuters, after their second-quarter profits beat an already record-breaking previous quarter on the back of soaring crude, gas and oil product prices. Combined, the two companies are buying back $8 bn in shares in the third quarter after recording their respective highest quarterly profits while keeping their dividends steady, which might disappoint some investors. Benchmark Brent crude oil futures have risen more than 140 percent in the past 12 months, averaging around $114 a barrel in the quarter.
– The FT reported that Jack Ma is planning to give up control of Ant Group, a change that would further delay the Chinese financial technology giant’s plans to launch an initial public offering. Ma’s retreat comes after Beijing derailed Ant’s blockbuster IPO almost two years ago, and demanded the group restructure its operations. That moment ‘also led the billionaire entrepreneur to pull back from public view, as Beijing moved to rein in the influence of its corporate titans and launched a wider crackdown on tech,’ said the paper. The ‘rectification’ process overseen by the Chinese central bank has forced Ant to revamp its business by selling stakes in top-performing units such as lending and credit scoring to other groups, including state-owned companies, as well as shrink some of its operations like a proprietary money market fund that was once the world’s largest.